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Think we are violently agreeing - to a degree!
It has to be a given that a market leading business does the fundamentals well. This business has the management to do just that. The issue is long term strategy and being convinced that it can execute. The CEO has received plaudits ( and rightly so) for delivering on her promise of asset sales . What we have yet to see is her strategy for profitable growth, what this will look like And the returns it will generate. There is nothing she or anyone else can do re short term performance as it is already priced in.
We have had numerous capital market days and other occasions but only weasel words. The markets need convincing and she has to do so pdq……or the alternative may be what you and me do not want to happen…..though it will be beneficial to me financially!
Pokerchips - I have held Aviva (and its predecessors share for >30years) so I know a little about this business and the industry... and yes I have a grip and no I'm not mad. Just a shareholder who wants consistent capital and dividend growth.
No, I do not want this business to be acquired by a foreign company. What I said was that I am finding it difficult to see how the business in its current state can grow organically and profitably given that it is already a leading player in its three core markets that are amongst the most concentrated and advanced insurance markets in the world; it sold its Polish business for example (to Allianz!!) - a good business, in a strong growth market with low per capita spend on insurance - why?.... and I know that Allianz couldn't believe its luck!!) Given its rationalised state, relatively strong balance sheet and solvency position - not to mention share buy backs and special dividend, there has been no material change in the share price. The business is a sitting duck and like it or not if it doesn't get its act together and convince the market with a plausible long term strategy then I am afraid i will be sitting with a large bunch of Allianz, Axa, Zurich, AIG etc shares or a capital gain relative to where the shares sit today. You may not like foreigners but as a shareholder my guess is they would provide better long term returns than Aviva as is.
I would suggest you have a look at the history of RSA (an opportunity missed by Aviva) and where it ended up notwithstanding the fact that it had a total mess of a geographic mix of business and a financial metrics that were nowhere near as strong as Aviva's today.
Yes there are macro economic and geo political issues at play just as there have always been. Notwithstanding, this business has substantially underperformed its peers and continues to do so.
Perhaps you can explain how you think this business can grow profitably on a consistent basis from its current market positions in UK, Ireland and Canada? I highlighted the current rating position and its expansion into business lines that it has no real previous experience; yes it has made a bolt on HNW acquisition and is actively seeking to grow in the heavy commercial sector - I hope they execute well but it is risky. It has just increased its cash pile with the disposal of Singlife - I want it utilised to help build a stronger business but time will tell.
Increasing the dividend would be nice but I doubt if that alone would see the share price rise significantly. Yes the business has been rationalised but it now consists essentially of three market leading businesses in markets that are mature, highly concentrated and competitive. The challenge is how to grow these businesses significantly and profitably. Rates are increasing sharply and Aviva is entering sectors in the UK where it previously had minor exposure and experience (heavy commercial and HNW). The big question is whether all of this will generate the required returns in future? Bolt on acquisitions of sizeable scale would help and create a business that can genuinely dominate the market.
Other than the above the only way I can see shareholders get a significant capital return is for Aviva to be acquired but an AXA, Allianz or Zurich as it is now ready made for integration given its rationalised state.
Think this is an over reaction. Anything major likely to impact year end results would have been communicated - think this CEO manages the investment community better than DLG. Aviva business mix not comparable - bigger commercial and life biz plus investment arm all of which will smooth any adverse impact on personal lines plus cat reinsurance will kick in if required. indexation on household will boost premium volume plus a good dose of bad weather also gives a good excuse to increase base premiums! A good buying opportunity methinks!!
It will undoubtably take a hit - though the overall cost of a severe weather event is capped due to catastrophe reinsurance arrangements in place. Not sure what the excess figure will be but I would doubt if the cost will impact materially on the group year end result.
Thanks Hitman - seems to be some ambiguity as to the precise date on which the capital repayment will physically occur. I concur with you thoughts on price movement… but who knows:)! In any event I’ll wait til cash in hand the re-acquire unless something dramatic occurs.
Hitman - re your comment on the non ISA CGT 30 day rule. am I right in saying that by purchasing shares to the value of the capital repayment received you avoid potential CGT liability on the capital repayment ? - and of course simultaneously increase %holding in Aviva !
Thanks
Trotsky, interested in your exchange with Devon and broadly agree with your position……save for…..your view that “AV has proved it can continue to deliver”. I think you are being unduly optimistic. Yes the CEO has delivered on disposals….that was the easy bit given that these assets save for the Italian business were of value and attractive bolt on propositions. The so called core businesses that remain are all in advanced and saturated markets where per capita spend on insurance ranks amongst the highest in the world ie the only routes to growth being via pricing or acquisition. The life business offers up growth opportunities on the pensions side but the economic outlook will temper this somewhat. The GI side is where I see problems ahead;AV is focusing on building its commercial lines portfolio - not an area of strength and if risk selection and pricing is wrong it will flow through into bottom line in 12/18 months. Personal lines will become increasingly competitive.. For the CEO to predict substantial dividend growth suggests she believes she can grow the business against serious headwinds , will release excess claims reserves, have to bring down costs at a faster pace than of late and / or go down the acquisition route. I just don’t think she has has shown any capability to date that she can grow the business profitably. My reckoning is that having trimmed the business and tidied up the balance sheet AV will become an acquisition target in the not too distant future. Interesting times.
Thanks Shatter I must learn to read better!! Having looked again at the Aviva announcement, it seems that the route will be issuing B scheme shares equating to your ordinary share holding which Aviva will subsequently redeem in cash.
Sorry if this is a daft question but could someone clarify the arrangement for me. If you have 100 shares do you receive a cash payment of £100 or do you receive B shares to the value of £100 that can be held/ sold as you wish? The 100 shares will simultaneously reduced to c75 dependent on formula as yet to be determined. ?
First time posting. I am retired having worked for Aviva and it’s legacy companies for many years.
Having watched a succession of CEOs and BODs cause immeasurable damage to a fundamentally sound business the current CEO has certainly bolstered the balance but leaves the company with essentially three businesses in markets where it has strong market share but where future profitable growth prospects are limited due to the saturated nature of these markets.
GI organic growth strategy in the UK seems to be focused on SME business but with an eye to building a heavy commercial risk business ( where the company has a dearth of expertise). My take is that short term premium growth will look good but losses will follow due to inadequate pricing / risk assessment. Profitable organic growth in personal lines will be extremely difficult notwithstanding the fact that Aviva is ahead of the game digitally. There is a degree of scope in the life sector - pensions and savings but competition is tough though returns fairly predictable / stable.
So in my humble opinion bolt on acquisitions will be likely part of the way forward - not always successful - but a means to an end.
More likely is that Aviva will be viewed as a prime acquisition target and ultimately broken up a la RSA. This is the only realistic means I can see to secure real value for shareholders.
Meanwhile we await details on the return of the remaining £3b excess capital to shareholders. Special dividend would be good but would simultaneously reduce the share price and create tax issues for those with shares sitting outside ISAs. Perhaps an issue of special shares would be better that would enable disposal in a tax efficient manner?
Interesting times !